Online search engines are often used to search the Internet for specific content that is of interest to the user. This is generally accomplished by entering keywords into a search field that relate to the specific interest of the user. Generally, the search engine would then try to match the entered keywords to web pages that contain the keywords or that have been associated with the keywords through some methodology. The user is then provided with a list of search results that are ranked in order with the most relevant search results at the top of the list and the least relevant search results at the bottom of the list. Generally, revenue for the search engines would be generated by advertisements that are placed on the page along with the search results. The user could select the advertisement and be redirected to a web page for the ad sponsor. However, certain advertisers may have a particular interest in displaying their advertisements with searches based on particular keywords that may indicate an interest in their product. Further, advertisements at the top of a list of advertisements are more likely to be selected by the user than the advertisements further down the list. Accordingly, a different value may be placed on the advertisement based on their position in the list.
There are three major stages in the development of sponsored search advertising. First, advertisements were sold manually and slowly in large batches, and on a cost per impression bases. Next, keyword-targeted per-click sales were implemented. This began to streamline advertisement sales with some self-serve bidding interfaces that facilitated an auction for ad placement, but these auctions resulted in a highly unstable first price mechanism. More recently, generalized second price auctions (GSP) were adopted. A GSP auction generally does not have an equilibrium in dominant strategies, and truth telling is typically not an equilibrium of GSP auctions. So advertisers must strategize in determining their bid. Therefore, the mechanism encourages inefficient investments in the bidding system. It can also create volatile prices that in turn cause allocative inefficiencies. Truth telling is an equilibrium when no one advertiser can benefit by changing their bid.
In the simplest GSP auction, advertisers submit bids and the ads are shown according to the bid amounts. In a more complex GSP auctions an ad can be assigned a score that is a function of bid, relevance, clicability, quality of the ad, advertiser volume, etc. Then the ads can be ordered based on scores. The key feature of GSP auction is that the payment of an advertiser in a particular position is generally lower than his bid; the payment is set to be equal the lowest bid sufficient for occupying that position. When a user enters the keyword, he receives search results along with sponsored links, where the sponsored links are shown in decreasing order of bids. In particular, the ad with the highest score is displayed at the top, the ad with the next highest score is displayed in the second position, and so on. If the user subsequently clicks on an ad in position k, the advertiser is charged by the search engine an amount equal to the next highest bid, for example the bid of an advertiser in the k+1 position, provided that all ads are of the same quality.
In view of the above, it is apparent that there exists a need for an improved system and method for updating bid advertisements.